Giving evidence before the Commons public accounts committee on Tuesday, the NHS chief executive was asked to comment on the work of health economist Carol Propper.

Committee chair Margaret Hodge MP quoted Ms Propper’s findings that “hospitals under financial pressure focused on cutting prices and shortening waiting times” and that as a result patients in hospitals “located in competitive markets were more likely to die after admission following a heart attack”.

Sir David responded that price competition was only safe where there were good quality measures, good “measures of monitoring quality”, and sophisticated patients able to judge the quality of their treatment.

He added: “If you’ve got those three things in place I think it’s possible to start talking about price competition but it seems to me that until you’ve got that it’s a very dangerous thing to do.”

Ms Hodge replied: “Under the health service reforms it will be a maximum tariff but there won’t be a minimum tariff, and that way people will compete.

“Is what you’re telling us today that actually until you’ve got all these other safeguards in place that is extremely dangerous in terms of quality?”

Sir David replied: “That’s right.”

Asked by HSJ why, given his own concerns, the change was being introduced, Sir David said: “To test it. To, in very restricted circumstances, test it as a pilot and see what happens.”

For the first hour of the committee hearing, Ms Hodge repeatedly demanded Sir David explain why NHS productivity had fallen over the past 10 years.

She said: “The tragic missed opportunity is that in the period of growth, when you weren’t looking for cuts, you didn’t take advantage of that period of growth to eek out best value for money.”

Sir David, replied: “When you put huge amounts of capacity into the system the initial response of the system is for productivity, in the narrow way that it’s described, to go down.”

He added that the National Audit Office report they were discussing, Management of NHS Hospital Productivity, had not used a measure which “reflected the value for money improvements made over that period”.

King’s Fund chief economist John Appleby told the committee: “It was a period when hospital managers were getting a lot more money, they were set a target for waiting times, and they had huge pressure to employ more people.

“The way to meet the waiting times target was not necessarily to tackle difficult issues around changing work practices, it was to buy more consultants and do more work.”

The NHS is at risk of losing significant amounts of its additional funding growth because of the time it will take to address its workforce shortages, according to a former Department of Health senior official.